Carmelo Anthony to N.Y.: Business as usual?

Fans hope for playoff success, but on- and off-court doubts remain

By

SamMamudi

NEW YORK (MarketWatch) — Carmelo Anthony’s impending arrival in the New York Knicks locker room is firing hopes for greater success, but his arrival may not help the Knicks much in the standings or on the balance sheet.

The Knicks’ addition of a second superstar to play alongside Amare Stoudemire has some fans dreaming of a championship. And logic would suggest that having two starters from Sunday’s National Basketball Association All-Star Game on the same squad would help fill coffers as well.

But the NBA’s revenue-sharing rules, combined with the financial success of the Knicks even in lean years, may limit the business benefits of the deal, particularly in the near term. And with the Knicks trading three starters to land Anthony, there are questions about how much the move will improve the team.

“Carmelo Anthony has spent his entire career showing us that he’s not a superstar; he’s just a player who takes a lot of shots,” said David Berri, associate professor of economics at Southern Utah University and co-author of the book “Stumbling on Wins.”

“He’s really just a little above average, and the Knicks have probably added an extra two or three wins a season for a lot of extra cost.”

‘[T]he Knicks have probably added an extra two or three wins a season for a lot of extra cost.’
David Berri, Southern Utah University

The Knicks traded six players, including starters Raymond Felton, Dalino Gallinari and Wilson Chandler, to land the 26-year-old Anthony and five other players, though only one of those, Chauncey Billups, is expected to start for the Knicks. Anthony will likely sign a three-year, $65 million extension as part of the trade — a move that could potentially hinder efforts to sign other top players under future salary-cap rules.

Berri’s dissent might come as a surprise to the many fans who have viewed Anthony as an elite NBA player since his 2003-04 rookie season, but it’s a view supported elsewhere. ESPN analyst John Hollinger has estimated that the deal actually decreases the Knicks’ projected win total by one.

Not everyone in the media is so skeptical, with columnists from ESPN, Sports Illustrated and the New York Times among those praising the move.

Away from the court, Brooklyn native Anthony’s New York homecoming will lead to a bump in attention and excitement from NBA fans this season. But it’s unlikely that interest will boost the Knicks finances this year or in the next few seasons, and it will take more than just his presence to hold on to that buttressed interest in the future.

“The effect of a player’s move is felt in Year 1, but after that it’s down to winning,” said Matt Powell, an analyst at SportsOneSource.

The Knicks were already having a great year at the box office — buoyed by the team’s dramatic improvement. Crowds at Madison Square Garden have been at 99% capacity this season, and 25 of 27 home games have sold out.

Ticket sales next year and beyond, said Berri, will be determined by how well the team plays rather than who’s on the team. His research shows that what drives home attendance is primarily wins — even the presence of superstars doesn’t have much impact on local ticket sales.

Berri said he hasn’t seen research on how much a newly arrived star improves television ratings. Earlier this month, Sports Business Daily reported that, through January, the Miami Heat had enjoyed the biggest rise in local ratings this season, more than doubling viewership following the arrival of LeBron James and Chris Bosh to play alongside returning star Dwyane Wade. By contrast, the Cleveland Cavaliers, the team James left, saw the biggest decline, with ratings falling 53%. Read about the change in local TV ratings (external link).

But, in both cases, performance may have played a big part. After stumbling to a 9-8 start, the Heat currently stand at 41-15; the Cavaliers, meanwhile, have the league’s worst record, 10-46, having suffered through a 26-game losing streak, the longest in NBA history.

A small part

Even without Anthony — who played his lone year of college ball at Syracuse University — Knicks parent company Madison Square Garden Inc.
MSG, -4.26%
was making money quite tidily. In the first three months of 2010, when both the Knicks and the New York Rangers were playing (and neither was having a particularly good season), it saw revenues of $307 million, less than half of which, $143 million, came from its MSG Sports arm, which includes the Knicks, Rangers and the WNBA’s Liberty. TV revenues brought in almost the same amount; those dollars ultimately depend on eyeballs, but the bulk of revenues for its MSG and MSG Plus stations are in the form of long-standing payments from cable companies.

What’s more, increased merchandise sales will have little effect. NBA rules mean that merchandise sales are shared across the league. Only sales at Madison Square Garden and via the Knicks’ own website go directly to the club.

“The Knicks are a small part of that corporation’s assets,” said Berri. “Everything they do is to try to win [rather than improve the books].”

One area where a successful team would boost finances is the playoffs. The Knicks haven’t reached the playoffs in almost seven years, and haven’t gotten past the first round since 2000. A deep postseason run would mean many more home games and additional TV revenue.

As for Anthony, two sports marketing experts predicted an uptick in his personal endorsements from local businesses such as car dealerships, restaurants and retailers. But, despite playing in the country’s biggest media market, it’s doubtful his national stature will rise unless the Knicks start contending for NBA titles.

For all the excitement surrounding the move, Anthony lacks something the very biggest stars like James, Heat teammate Wade and the Los Angeles Lakers’ Kobe Bryant have enjoyed: on-court success. Only once in his career has he been beyond the first round of the playoffs, reaching the Western Conference finals in 2009.

“You have to win to really [be the biggest star] — or at least bring the anticipation of winning,” said Powell.

Despite the naysaying, though, the Knicks are betting that their bold move Monday will deliver a contending team, an outcome that will end up helping them — and Anthony — both on and off the court.

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